A company prospectus is released by businesses to inform the public and investors of the various securities that are available. These documents describe to buyers and participants about mutual funds, bonds, stocks and other forms of investments offered by the company. A prospectus is generally accompanied by basic performance and financial information about the company.
During the period of time in which a company is being established, the prospectus is released by the brokerage firm or underwriter of the business venture. This is done at the time of the initial public offering to investors.
A company prospectus usually contains information on the leadership of the company. It details short biographies of the officers who manage the day-to-day operations of the business.
Pending litigation is also a topic that is included in a company's prospectus. This information is critical to the investor base. Lawsuits often have detrimental effects on the long-term success of a company. As such, the investors need to know this information.
In the United States, a publicly-traded company must file a copy of its prospectus with the Securities and Exchange Commission (SEC). In order for a business to issue shares and finalize sales, the document must follow all rules and regulations of the SEC.
A simplified version of a prospectus, often referred to as an "offering memorandum," can be issued instead of the full document. This can occur only in cases in which a business files a Form 10-K and can prove that its market capitalization is stable.
- Understanding a Company Prospectus
- SEC What is a Prospectus?
- U.S. Securities and Exchange Commission. "Registration Under the Securities Act of 1933." Accessed Nov. 4, 2020.
- U.S. Securities and Exchange Commission. "Investor Bulletin: Investing in an IPO." Accessed Nov. 4, 2020.
- U.S. Securities and Exchange Commission. "Information Available to Investment Company Shareholders." Accessed Nov. 4, 2020.
Jason Chavis has been a professional freelance writer since 1998. He is the author of four books, two movies and a play as well as numerous articles for "Scientific American," The History Channel, City Pages and "The Onion." In 1996, Chavis won the award for "best science fiction/fantasy" from the River Valley Writer’s Conference.